Sorenson Speaks Out

The current economic cycle, the ongoing trade war with China, the rise of Airbnb and the home sharing economy as well as the future of travel were among the key issues that Marriott President and CEO Arne Sorenson provided some perspective on at the Lodging Conference earlier this week.

On the personal side, Sorenson—who was interviewed by Kathleen Matthews, global ambassador, World Travel and Tourism Council, and former Marriott executive—also told attendees that his fight with pancreatic cancer is “going well.”

While Sorenson pointed out that the economy is still performing pretty well, he acknowledged there is plenty of uncertainty throughout the industry about the current cycle. “We’re now in year 10 of a recovery so when you’ve got that first anxiety coming I think a number of folks say ‘maybe this is the end,’” he noted.

Sorenson continued, “if I’m a hotel owner probably the principal thing to do is to look at debt levels. Are they too high? Are they structured with long enough term and with terms that allow me to weather a weaker economic patch? I think one of the bits of good news about the business is as we’ve gone through these recessions we have proven as an industry that asset values are really quite resilient.”

In addition to the maturing economic cycle, Sorenson maintained that the current relationship with China is “feeding some obvious anxiety.”

He further noted, “With China being the second biggest economy in the world and with real uncertainty about the trade relationship between the U.S and China you’ve got folks who are saying we’re worried about the impact of that on the U.S. economy. We’re worried about the impact of that on our business,” he said.

Meanwhile, Sorenson reminisced about a meeting with Airbnb co-founder Brian Chesky years ago to better understand its business model and the home sharing economy.

“One of the things that come through loud and clear to me at that time was the gift that they had of running a system in which any bad experience was not blamed on them, but rather the host or the guest. They had built this tech platform that allowed them really without branding to say ‘alright we’re going to put the two of you together and you’re going to rate each other and if you have a bad experience it’s going to be somebody else’s fault.’ I knew if Marriott had made exactly the same business decisions that Airbnb did we would have been crucified for the inconsistent experience that is still one of the opportunities for us and challenges for them,” he said.

As such, Sorenson elaborated on the company’s entry into the space with Homes & Villas by Marriott International.

“We were looking at this and said ‘we can bring our loyalty program and we can bring sort of a branding promise to a smaller selection of units that are more extended stay and bigger’ so they’re different from hotel rooms. We essentially end up with something where we can be quite competitive in the part of the market we’d like to be competitive in. Of course, we just started this and we’ll see whether or not we succeed, but I think it’s going to be very exciting. It’s certainly fun to be engaged in it right now,” he noted.

The CEO talked about the future of travel and the importance of providing something unique, particularly with younger travelers.

“People want experiences and they want to travel. You’ve got this huge middle class that has resources for the first time to travel. That tailwind is massive.
I watch my kids and they will elevate dining and travel much higher in the pecking order of their needs than we would have when we were their age. They take a trip and run off and post photos to Instagram and sort of brag about the intensity of the experience. That is a trend which I think has very long-term legs and should be good for us,” he said.

Sorenson went to add that the industry does have some challenges ahead in how to effectively manage some of the different technology disruptors and social media platforms that have emerged. “I actually think Google, Facebook and Amazon are the extraordinary juggernauts, but how do we navigate our role in that space so that our customers are our customers,” he said.

Sorenson noted another challenge that concerns him is the potential for headlines at hotels for the wrong reasons, such as hosting a particular group that “somebody’s going to complain about” for any number of reasons.

“We are in the business of welcoming everyone to our business...We’ve got Donald Trump staying in our hotels and we’ve got Bernie Sanders staying in our hotels and both are welcome and have to be welcome,” he said.

In addition to some of the industry issues, Sorenson provided some color on the company culture that’s been established at Marriott and what he sees as the keys.

“You’ve got to be deliberate about your culture and one of the extraordinary benefits I have as CEO of Marriott is there is this 85-year legacy that preceded my role as CEO of being focused on our people. To invest in that sort of cultural legacy I think is hugely important,” he said, later adding it’s also critical to “pick the right partners” to do business with.

The third and final critical element, according to Sorenson, is about delegating authority. “This is something that I’ve been aggressively pushing. That delegation of authority is not just to the continental presidents but it’s to the GMs and the executive teams at the hotel. We say ‘we expect you to take responsibility and be accountable for the way the culture comes through in the company; for what your team says about the way they work; for the pride, hopefully, that they have in the work that they do.’ If you give them the tools and room to run and you emphasize the importance of the culture, I think there’s a way to navigate this even with a company as big as ours,” stressed Sorenson.